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REPORTABLE
CASE NO: SA 62/2016
IN THE SUPREME COURT OF NAMIBIA
In the matter between:
COMMUNICATIONS REGULATORY
AUTHORITY OF NAMIBIA Appellant
and
TELECOM NAMIBIA LTD First Respondent
MINISTER OF INFORMATION
AND COMMUNICATION TECHNOLOGY Second Respondent
GOVERNMENT OF THE REPUBLIC OF NAMIBIA Third Respondent
MTC NAMIBIA (PTY) LTD Fourth RespondentIntervening party
Coram: DAMASEB DCJ, SMUTS JA and CHOMBA AJA
Heard: 6 April 2018
Delivered: 11 June 2018
Summary: Section 23(2)(a) of the Communications Act 8 of 2009 (the Act)
authorises the Communications Regulatory Agency (CRAN) to by regulation
impose a levy to ‘defray’ its ‘expenses’ as contemplated under s 23(1) of the Act,
for the purpose of regulating the telecommunications, postal and radio spectrum
industries. CRAN by regulation published on 13 September 2012 imposed a levy
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of 1.5% on gross income of telecommunications providers, including the first
respondent (Telecom). Telecom refused to honour the levy and challenged s 23(2)
(a) and the regulation made under it in the High Court, alleging that the
regulation impermissibly had retroactive effect, and s 23(2) (a) either
constituted an unconstitutional tax without representation, or constituted an
unconstitutional delegation by parliament of plenary legislative power.
The High Court upheld the constitutional challenge holding that s 23(2)(a) of the
Act was a tax as it went beyond what s 23(1) authorised; there was no connection
between the regulatory scheme and the charges levied based as it was on a
percentage and without actual or properly estimated costs of regulation. The order
of invalidity took effect from the moment the Act came into force as no order was
made delaying the order of invalidity. Costs were ordered against CRAN.
On appeal by CRAN to the Supreme Court:
Held: The High Court misdirected itself on the applicable test for determining if a
charge is a tax or a regulatory levy; that even if a charge has all the attributes of a
tax but is connected to a regulatory scheme, it will not be a tax.
Held: The Act represents a complex and complete regulatory framework for the
affected industries with substantial benefits and privileges to those granted
licenses to operate under it; and, therefore, there is a relationship between the
scheme and those being regulated.
Held: The pith and substance of the Act (or its dominant purpose) is to regulate
behaviour and the raising of revenue is only incidental. The levies imposed are
intended for the carrying out of the policies of the legislation and need not be
directly linked to the costs of regulation.
On appeal, court considered if s 23(2)(a) was unconstitutional on the alternative
ground that it granted uncircumscribed plenary legislative power to CRAN.
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Held: Although a levy of 1.5% on annual turnover was not per se unconstitutional,
as it was within the international norm as shown in evidence and in cases
considered, the absence of clear (or any) guideline or limit for its exercise failed to
remove the risk of an unconstitutional exercise of discretionary power by CRAN,
and rendered the section and regulation made thereunder unconstitutional. But
order of invalidity made to operate only from date of judgement.
Held: That for the period preceding the taking effect of order of invalidity, CRAN
can only exact payment from Telecom such amounts as are due after the
regulation came into force.
As regards costs, held that the litigation enriched Namibia’s constitutional
jurisprudence and none of the parties was frivolous; and therefore it was an
appropriate case for each party to bear its own costs; both in the High Court and
on appeal.
Appeal allowed and order of the High Court corrected appropriately.
APPEAL JUDGMENT_________________________________________________________________
DAMASEB DCJ (SMUTS JA and CHOMBA AJA concurring):
Introduction
[1] Namibia’s Communications Act 8 of 2009 (the Act) was enacted to ‘provide
for the regulation of telecommunication services and networks, broadcasting,
postal services and the use and allocation of radio spectrum’.1 I will henceforth
refer to these services collectively as the ‘regulated industries’.
1 Long title to the Act.
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[2] The Act’s objects have wide amplitude:2 to establish the general framework
governing the opening of the telecommunication sector to competition; to provide
for the regulation and control of communications activities by an independent
regulatory authority; to promote the availability of a wide range of high quality,
reliable and efficient telecommunications services to all users in the country; to
promote technological innovation and the deployment of advanced facilities and
services in order to respond to the diverse needs of commerce and industry and
support the social economic growth of Namibia; to encourage local participation in
the communications sector in Namibia; to increase access to telecommunications
and advanced information services to all regions of Namibia at just, reasonable
and affordable prices; to ensure that the costs to customers for
telecommunications services are just, reasonable and affordable; to stimulate the
commercial development and use of the radio frequency spectrum in the best
interests of Namibia; to encourage private investment in the telecommunications
sector; to enhance regional and global integration in the field of communications;
to ensure fair competition and consumer protection in the communications sector,
and to advance and protect the interests of the public in the providing of
communications services and the allocation of radio frequencies to the public.
[3] The appellant is the ‘independent Communications Regulatory Authority3’
(CRAN), created by s 4 of the Act ‘to regulate the communications industry in
Namibia’4.
2 Section 2 of the Act.3 Long title to the Act.4 Section 5 of the Act.
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CRAN’s regulatory competence
[4] CRAN’s mandate under the Act includes: to guard against anti-competitive
practices in the telecommunications and broadcasting industries (Chapter IV) and
in that respect to investigate, enforce and authorise any breach of competition
rules (s 33); to approve the transfer of telecommunication or broadcasting licences
from one operator to another (s 35); to issue, renew, modify or terminate
telecommunication licences (Chapter V); to adjudicate upon disputes between
licence holders (s 69); to adjudicate any dispute that may arise between a
telecommunication service provider and institutions wielding the power to intercept
personal communications (s 74); to conduct hearings to determine which
operators hold a dominant position in a market (s 78); as part of its consumer
protection role to make available to the public the standard terms and conditions
for the provision by operators of telecommunication services (s 79); to set
standards for telecommunication equipment (s 80); to prescribe a national
numbering plan for use in the provision of telecommunication services (s 81); to
issue broadcasting licences (s 85); to supervise compliance by operators with
conditions imposed on broadcasting licences (s 90 (i)); to issue postal service
licences (s 93); to issue radio spectrum licences (Chapter VIII); and to issue
enforcement orders against any person who contravenes or failed to comply with
any provision of the Act (s 116).
[5] The immense public benefit of telecommunications in the modern State is
exemplified by the fact that licensees engaged in the regulated industries may be
required by CRAN to provide a minimum number of prescribed telecommunication
facilities or services to communities, known as a ‘universal service’ (s 57).
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[6] The all-encompassing objects of the Act, CRAN’s extensive mandate, and
the requirement that those who wish to engage in the regulated industries must be
licensed, make it apparent that Namibia’s telecommunications, broadcasting,
postal and radio spectrum landscape represents a complete and complex
regulatory framework. If proof was needed of the completeness and rigour of the
regulatory framework, the Act makes it a criminal offence for anyone to conduct
any unauthorised business regulated by the Act and over which CRAN has
supervisory jurisdiction.5
[7] CRAN even has power to issue criminal summons for contraventions (s
115(1)) and to hold hearings and to impose criminal sanctions in the event of guilty
pleas (ss 115(2) and (3)). This tight regulation by the Act of the regulated
industries indubitably shields licence holders from unbridled competition in what is
otherwise a notoriously competitive industry that telecommunications is. The
significance of this will become apparent when I come to discuss whether or not
the impugned section is a form of tax or a regulatory levy.
Funding of CRAN
[8] According to s 22 of the Act, CRAN derives its funds from an ‘initial amount
appropriated by Parliament’; fees from the grant, renewal and transfer of licences;
any revenue received for services it provides; fines and monetary sanctions
imposed by CRAN, and any levies prescribed under the Act. It is clear therefore
5 See in this regard Chapter X of the Act which deals with regulatory offences.
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that, barring the ‘initial’ appropriation, the Act makes no provision for CRAN to
receive a steady income from the National Treasury.
[9] Levies are governed by s 23 of the Act in the following terms:
‘Regulatory levy 23. (1) The Authority may by regulation after having followed a rule-making
procedure, impose a regulatory levy upon providers of communications services
in order to defray its expenses.
(2) Regulations made in terms of subsection (1) may impose the levy in one
or more of the following forms:
(a) A percentage of the income of providers of the services concerned
(whether such income is derived from the whole business or a
prescribed part of such business) specified in the regulations
concerned;
(b) as a percentage of the profit of the provider concerned (whether in
respect of the whole business or in respect of a prescribed portion
of such business), calculated in the manner prescribed in the
regulations concerned;
(c) a fixed amount per year in respect of such services as may be
specified in the regulations concerned;
(d) a fixed amount in respect of any call made, any line made available,
or a specified amount of capacity or bandwidth made available in
respect of a particular service; or
(e) in any other manner that is not unreasonably discriminatory.
(3) Regulations made in terms of subsection (1) may –
(a) prescribe the periods and methods of assessment of the regulatory
levy;
(b) prescribe the information to be provided to the Authority for the
purpose of assessing the regulatory levy;
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(c) Prescribe penalties for the late payment of the regulatory levy, or
for providing false information or for the failure to provide
information to the Authority relating to the assessment of the levy.’
(Underlined for emphasis).
[10] Purporting to act on the authority of s 23(2)(a), CRAN promulgated
Regulation 6 ‘Licence Fees’6 (sic), hereafter ‘Item 6’ or ‘impugned regulation’. The
effect of Item 6 is that a telecommunications service provider (such as the first and
second respondents) is levied a ‘minimum’ percentage on its ‘turnover’ – being
1.5%. The Concise Oxford English Dictionary defines ‘turnover’ as ‘the amount of
money taken by a business in a particular period.’
[11] At the heart of the present appeal is CRAN’s power to by regulation source
funds from levies under s 23(2)(a) of the Act. The High Court had found that the
section unconstitutionally constitutes the imposition of a tax by CRAN as opposed
to the levying of a regulatory levy for the purpose of ‘defraying expenses’.
According to the learned judge a quo:
‘[16] What makes this case one of its kind is this. The Legislature itself provided
for the imposition of a regulatory levy in subsec (1) of s 23; but it veered off this
correct path and wandered into the wrong path of providing for the imposition of a
tax under subsec (2)(a) of s 23. The conclusion is therefore inescapable that the
imposition of tax could not have been what the Legislature intended, if regard is
had to the width of the wording of subsec (1) of s 23, but the Legislature’s
intention was not given words to in subsec (2) (a), as it should have been the
case, if regard is had to subsec (1) of s 23 and if the two provisions are read
intertextually.’
6 ‘Regulations Regarding Administrative and Licence Fees for Service Licences’ No 311 of 2012 GG 5037 of 13 September 2012.
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As regards the impugned regulation, the learned judge concluded:
‘[17] Where there is no connection between the regulatory scheme and the
charges levied or to be levied the court will scrutinize the facts to ensure that the
Constitution is not circumvented by legislative or administrative action. Having
scrutinized the facts, and relying on the authorities, I come to conclusion that
subsec (2)(a) of s 23 of the Act is not Constitution compliant. . . . it serves no
purpose to give any regulation made under s 23(2)(a) any deep treatment, except
to say that it cannot stand in law if the enabling provision, being s 23(2)(a), is not
Constitution compliant.’
[12] The learned judge a quo relied principally on Canadian jurisprudence on the
tax versus regulatory levy dichotomy to support his decision. He found that
although the Act reveals a regulatory scheme, and s 23(1) of the Act authorises
the imposition of a levy ‘to defray’ CRAN’s expenses, that section, instead of
facilitating a regulatory levy, is a form of taxation. He said at para 11 of the
judgment:
‘I do not see any relationship established between the charge, which is based on
a percentage of the income of providers of services ‘regulated by the first
respondent, and the regulatory scheme itself; neither, as a matter of logic, can
there be any such relationship when the rate chargeable is based on a
percentage – no matter the absence of ‘actual or properly estimated costs of the
regulation’ which need defraying.’
[13] The High Court made the following order: ‘(a) It is hereby declared that s
23(2) (a) of the Communications Act 8 of 2009 and any regulation made
thereunder are unconstitutional and invalid’. CRAN was ordered to pay the costs
of the application.
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[14] The question is, was the judge a quo correct? Did he correctly apply the
relevant test for determining whether a particular charge is regulatory or a form of
tax?
The issues in the appeal
[15] On appeal, the following issues have crystallised – whether: (a) the scheme
created by s 23(2)(a) of the Act is in the nature of a tax or revenue collection, and
(b) whether s 23(2)(a) is an unconstitutional abdication by parliament of its
legislative function.
[16] It admits of no doubt that an affirmative answer to either of the issues thus
posed would invalidate s 23(2)(a). In respect of the first because - as is common
cause - there can be no taxation without representation. In other words, the
subject cannot be made to suffer the burden of tax except by law duly enacted by
the branch of government wielding the power to make and unmake laws7. Article
63(1) of the Namibian Constitution states that:
‘The National Assembly, as the principal legislative authority in and over Namibia,
shall have the power, subject to this Constitution, to make and repeal laws for the
peace, order and good government of the country in the best interest of the
people of Namibia.’
Sub-article 2(b) empowers the National Assembly, subject to the Constitution, ‘to
provide for revenue and taxation’. The Constitution contains detailed provisions8
7 For a comparative exposition of the principle, see the judgement of the SA Constitutional Court in Fedsure Life Insurance Ltd & others v Greater Johannesburg Transitional Metropolitan Council & others 1999 (1) SA 374 (CC) para 44 and fn 44.8 Most notably, Articles 62 (sessions), 64 (withholding of presidential assent), and 65 (signature and enrolment).
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on how the legislature is to go about enacting legislation, including that providing
for revenue and taxation.
[17] As for the second because of two principles that underlie that issue. The
first is that although it is permissible for parliament to delegate a legislative power
to the executive or an administrative body, it may not delegate plenary legislative
power. That approach has been accepted as trite by the South African
Constitutional Court and applies with equal force to the interpretation of the
Namibian Constitution. As Chaskalson P put it in Executive Council, Western
Cape Legislature, & others v President of the Republic of SA & others 1995 (4) SA
877 (CC) para 51:
‘In a modern State detailed provisions are often required for the purpose of
implementing and regulating laws Parliament cannot be expected to deal with all
such matters itself. There is nothing in the Constitution which prohibits Parliament
from delegating subordinate regulatory authority to other bodies. The power to do
so is necessary for effective law-making. It is implicit in the power to make laws
for the country and I have no doubt that under our Constitution Parliament can
pass legislation delegating such legislative functions to other bodies. There is
however a difference between delegating authority to make subordinate
legislation within the framework of statute under which the delegation is made,
and assigning plenary legislative power to another body.’
[18] The third is the Dawood principle9, which has been approved by this court in
for example Medical Association of Namibia v Minister of Health and Social
Services & others.10 As the court put it in Medical Association at 85:
9 Based on Dawood, Shalabi and Thomas v Minister of Home Affairs 2000 (3) SA 936 (CC) and see also Affordable Medicines Trust & others v Minister of Health & others 2006 (3) SA 247 (CC).10 2017 (2) NR 544 (SC).
12
‘It is settled jurisprudence . . . that to pass the test of ‘law of general application’
[as required by Art 22(a) of the Constitution, a statutory measure conferring
discretionary power on administrative officials or bodies must be sufficiently clear,
accessible and precise to enable those affected by it to ascertain the extent of
their rights and obligations . . .; it must apply equally to all those similarly situated
and must not be arbitrary in its application . . . , and it must not simply grant wide
and unconstrained discretion without accompanying guidelines on the proper
exercise of the power. . .’.
And as this court had occasion to say in Rally for Democracy and Progress &
others v Electoral Commission of Namibia & others 2010 (2) NR 487 (SC) para 59:
‘One of the incidents of the rule of law is that law should be ascertainable in
advance so as to be predictable and allow persons to arrange their conduct and
affairs accordingly.’
[19] In Dawood (para 53) the Constitutional Court recognised circumstances in
which broad discretionary powers would be Constitution compliant - the
highlighted part representing what Mr Maleka SC for CRAN referred to in oral
argument as the ‘Dawood exception’ his client relies upon:
‘Discretion plays a crucial role in any legal system. It permits abstract and general
rules to be applied to specific and particular circumstances in a fair manner. The
scope of discretionary powers may vary. At times, they will be broad, particularly
where the factors relevant to a decision are so numerous and varied that it is
inappropriate or impossible for the legislature to identify them in advance.
Discretionary powers may also be broadly formulated where the factors relevant
to the exercise of discretionary power are indisputably clear. A further situation
may arise where the decision-maker is possessed of expertise relevant to the
decisions to be made.’
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[20] The two respondents, although not with the same emphasis, rely on one or
all of the three principles set out in paras 16, 17 and 18 above to support the High
Court's conclusion that s 23(2)(a) of the Act is unconstitutional.
The shifting onus
[21] A party seeking an order of unconstitutionality of legislation must put up the
necessary facts and contentions supporting the claim of unconstitutionality, in
other words the right relied upon and the manner in which it was allegedly
breached. The party relying on the legislation must then establish that the
provision is Constitution compliant (Compare Ferreira v Levin NO 1996 (1) SA 984
(CC) para 44).
[22] All law must comply with the Constitution, and to the extent it does not, is
liable to be declared invalid. Article 1(6) of the Constitution is the so-called
‘Supremacy Clause’. It states: ‘This Constitution shall be the Supreme Law of
Namibia’. The principle of no taxation without legislation is rooted in
constitutionalism, the rule of law and the separation of powers which are
foundational cornerstones of the Constitution. An infringement of those basic
principles underpinning the Constitution are just as justiciable as an infringement
of the fundamental rights and freedoms contained in Chapter 3 of the Constitution
(Bill of Rights).
Litigation history
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[23] When proceedings commenced in the High Court, only the first respondent
(Telecom) was an applicant who sought relief aimed at challenging the
constitutionality of s 23(2)(a) of the Act. After the appeal was set down in this
court, the second respondent (MTC), who is the dominant operator in Namibia’s
mobile telephony, sought leave, and was allowed, to intervene in order to place
legal argument before court in support of the High Court’s order and without
seeking to place evidence before court. In so doing, it promised merely to rely on
the grounds and bases set out by Telecom in its founding affidavit.
[24] Therefore, MTC stands or falls by the factual averments and legal
contentions put forward by Telecom in its founding affidavit in support of the relief
it sought. The outcome of the appeal will thus depend on:
(a) Whether Telecom laid sufficient bases for the conclusion that s 23(2)(a) is
offensive of either of the constitutional imperatives stated in paragraphs
16, 17 and 18 above - and in the event of it having set up an arguable
case in either respect;
(b) Whether CRAN was able to demonstrate that the impugned provision is
not a tax (or collection of revenue) but a regulatory levy; or is a form of
permissible delegation of a legislative function by parliament to an
administrative body.
The pleaded case
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[25] Often, in the heat of oral argument, parties tend to overstate their positions
and veer off their pleaded cases. This case was no exception. It is important that
the court stays focussed and decides only those issues properly raised in the
pleadings. Therefore, it is now necessary to consider the pleadings. Telecom’s
amended notice of motion reads:
‘1. That section 23(2)(a) of the Communications Act, 8 of 2009 together with
Item 6 of the Regulations Regarding Administrative and Licence Fees for
Services Licences No. 311 of 2012, published by Government Gazette No.
5037 on 13 September 2012, be declared unconstitutional and/or null and
void.
2. In the alternative to prayer 1 above, that Item 6 of the Regulations
Regarding Administrative and Licence Fees for Service Licences No. 311
of 2012 (the Regulation), published by Government Gazette No 5037 on 13
September 2012, be declared unconstitutional and/or null and void.
3. In the alternative to prayers 1 and 2 above, declaring:
a. That the Regulations Regarding Administrative and Licence Fees for
Service Licences No 311 of 2012, published by Government Gazette
No 5037 on 13 September 2012 do not operate retrospectively;
and that
3.2 regulatory levies imposed by the aforesaid Regulations can only be
imposed against the applicant in respect of turnover generated from 13
September 2012 and beyond.
4. That the respondents who oppose this application shall pay the costs jointly
and severally the one paying the other to be absolved.
5. Such further or alternative relief as the above Honourable Court may deem
meet.’
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[26] As will become apparent when I set out the version pleaded in Telecom’s
founding affidavit, the amended notice of motion places the unconstitutionality of s
23(2)(a) of the Act at the forefront, and the ultra vires of Item 6 in the alternative;
while the founding affidavit does the opposite.
Telecom’s pleaded grounds in the founding affidavit
The Regulations
[27] Item 6 was impugned for alleged vagueness in relation to the terms ‘annual
turnover’ and ‘expenses’, if measured against the Act and the Constitution. It is
alleged that contrary to the Act and the Constitution, the impugned regulation
imposes ‘levies’ exceeding the bounds statutorily set; which is to defray CRAN’s
expenses. In other words, that under the guise of a levy Item 6 imposes a tax and
that the purported levies exceed CRAN’s objectives and powers under the Act.
[28] According to Telecom, Item 6 imposes a limitation11 on its Art 21(a) and (j)
rights and does not comply will Art 22(b) of the Constitution. In the alternative, it
appears if all else fails, it is alleged that the imposition of levies for the year ended
30 September 2012 is null and void as the regulations cannot operate
retrospectively. The further attack is that the regulations are vague and therefore
void as the formula for determining the levy fails to define an amount. It is said that
the liability of the different licence holders is impermissibly determined by
reference to annual turnover whilst there is no clarity as to what constitutes
turnover in the sense of what it includes and what it excludes.
11 In the event, this ground was not pursued with any seriousness as a basis for invalidation of the impugned provisions, and will not be further considered in this judgment.
17
The Act
[29] Telecom’s case as pleaded is that if it be found that s 23(2)(a) of the Act
has the effect of permitting the imposition of tax by CRAN, the section would
violate Art 44 read with Arts 56 and 63(1) of the Constitution and, therefore, since
that section is unconstitutional, the regulations made thereunder would suffer the
same fate. The premise is that the power of taxation cannot be surrendered or
transferred in whole or in part to CRAN and to the extent the section does so, it is
subversive of the supremacy clause, the separation of powers, and the rule of law.
The evidence
Common cause facts
[30] The Act came into operation on 18 May 2011 while the impugned regulation
was promulgated on 13 September 2012. CRAN invoiced Telecom on 1 February
2013 for an amount of N$17 173 860 determined in terms of Item 6 and based on
Telecom’s ‘annual turnover’ for the year ended 30 September 2012. Telecom
objected to the invoice as a ‘blatant retrospective operation’ of the impugned
regulation. CRAN issued a further invoice on 6 September 2013 for N$18 717 000
relative to Telecom’s ‘turnover’ for the year ended September 2013. Telecom
refused to pay and denied liability resulting in the present litigation.
Telecom’s affidavit
[31] Telecom’s affidavit in support of the relief sought was deposed to by its
manager of legal affairs, Mrs Patience Kanguuehi-Kananelo. According to the
deponent, the Act does not authorise the impugned regulation. According to her, in
terms of s 23(1) of the Act, the only purpose of the regulatory levy is for CRAN to
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‘defray its expenses’; yet the impugned regulation does not confine itself to that
objective. Mrs Kananelo states that to meet the test for ‘defraying’ CRAN’S
expenses, the levy must have a rational connection with the expenses or costs of
service of CRAN and should be shared by all license holders ‘jointly’. She states
that CRAN’s Annual Report (ended March 2012) shows that its operating
expenses in respect of services rendered for the period amounts to N$13 375 671,
while CRAN for the same period generated an income of N$73 394 668 mostly
from regulatory levies.
[32] According to Mrs Kananelo, CRAN made a profit of N$61 235 159, thus
demonstrating that the levy regime is used to raise revenue and not merely to
defray expenses. That renders the regulation ultra vires the Act. She states further
that based on CRAN’s financial statement’s analysis undertaken by Telecom’s
expert witness, chartered accountant Mr Celliers, the levies account for five times
CRAN’s annual operating expenses. For that reason, she maintains, it is irrational
and that CRAN ‘operates as a tax authority unto itself’, contrary to the Constitution
which empowers only the legislature to impose taxes.
CRAN’s affidavit
[33] The opposing affidavit of CRAN is deposed to by its chief executive officer,
Mr Stanley Shanapinda.
In limine
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[34] The deponent alleges in limine that (a) Telecom’s application was not
brought within 6 months of it becoming aware of the levy imposed by the
impugned regulation as required by s 32(2) of Act, (b) that the relief is overbroad,
’vague and embarrassing’ because it seeks to declare the entire regulation “null
and void’, whilst the only relevant part is item 6, and (c) that no basis is made out
in the founding affidavit for the constitutional relief that Telecom seeks.
The mandate
[35] Mr Shanipanda emphasises the importance and broad extent of CRAN’s
mandate. He states that in order to properly carry out that mandate, CRAN is
required by the Act to employ staff with specialist skills in law, accounting,
economics, engineering and technology, to mention only a few. It is also allowed
by law to invest funds standing to its credit and to acquire property to house its
staff and to run operations from.
The evolving scene
[36] The deponent sets out the activities undertaken by CRAN since the Act
came into force. These include the setting up of the organisation from scratch,
developing strategic plans and engagement with those it regulates. He makes the
point that what CRAN spent on operational expenses in its formative years,
particularly the year ended 31 March 2011, is not reflective of what the true costs
are in the succeeding year and beyond as the organisation grows and matures.
By way of illustration, CRANS’s total staff costs for the year ended 31 March 2013
was N$12 255 230, while the total human resources costs were expected to rise to
N$19,3 million by the year ending 31 March 2014 and projected to be in the order
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of N$42 million by 31 March 2015. CRAN currently leases a property for office
space at the cost of N$865 725 and intends to acquire extra space at an additional
estimated cost of N$350 000.
[37] Mr Shanapinda proceeds to engage with (and undermines) Telecom’s
assertion that in the year its operations started it made a huge profit from the
levies it imposes on the regulated operations. According to him, in 2012 CRAN
received start-up funding of N$31 million from the government and a once-off
capital infusion of N$55 million representing arrear levies/fees paid by licensees.
As he put it, those figures constitute an ‘extraordinary injection of cash which will
not recur’.
[38] The witness states that barring the cash windfall, the actual revenue CRAN
generated for the year ended 31 March 2012 only shows a net operating surplus
of N$11 040 173 of which N$4 million is interest earned on retained capital. He
states that the international standard in the regulatory environment is to retain a
buffer of up to 20% of total revenue annually and that it is unreasonable to expect
a regulator to function on an exact break-even basis.
Determination of the levy
[39] The chief executive officer explains how, at its inception, CRAN consulted
with those it regulates, including Telecom, before it settled for the current levy
regime which is the subject of the constitutional challenge. The process was
21
preceded by the engagement of consultants who advised CRAN on the process of
determining the levy. The process also involved looking at what other jurisdictions
do internationally. The witness demonstrates that internationally regulators raise
levies (or fees as he calls them) as a percentage of licensees’ revenue. For
example, in Greece (0.025%), Hong Kong (15%), Kenya (0.5%) and India (6-
10%). Significantly, Mr Shanipanda states what the consultants’ advice concluded
as regards a formula for the determination of the regulatory levy envisaged by s 23
of the Act:
‘CRAN was advised that operating profit is not a viable variable to use because it
is easily manipulated by management decisions relating to investment and
depreciation.
. . .
Fees imposed in Uganda, Tanzania, Kenya and South Africa was used as a
benchmark for CRAN.’
[40] As part of the consultation process, CRAN published a notice of its intention
to make regulations in the government gazette and held a public hearing where it
disclosed its findings and proposals. Licensees, including Telecom, were
represented. According to Mr Shanapinda, Telecom in fact proposed at the
hearing that 1% of telecommunications related turnover of a dominant operator
and 1.5% for all other operators would be an acceptable levy. It was after this
process that the levy formula contained in Item 6 was determined and gazetted.
Submissions on appeal
Appellant
[41] Mr Maleka’s argument on whether or not s 23(2) (a) of the Act is a tax or a
revenue measure can be summed up thus: One has to consider what is the
22
dominant purpose of the statute under consideration. Is it regulatory or tax-raising
or revenue-raising? If the dominant purpose is regulatory but the statute has an
element of imposing a tax or raising revenue, the latter is incidental only and
therefore not inconsistent with the Constitution. Counsel relied on the South
African Constitutional Court case of South African Reserve Bank & another v
Shuttleworth & another 2015 (5) SA 146 (CC).
[42] In Shuttleworth, the South African Reserve Bank imposed a 10% levy
amounting to R250m on Mr Shuttleworth when he took his funds out of South
Africa during 2009. This levy was imposed in terms of s 9 of the Currency and
Exchanges Act 9 of 1933, read with various Exchange Control Regulations,
specifically, reg 10(1)(c); and Exchange Control Circulars - aimed at discouraging
capital flight from South Africa. The issue was whether the fee imposed by the
Reserve Bank was a levy or a tax or a measure intended to regulate behaviour.
The majority of the court found it was the latter.
[43] As Moseneke DCJ put it at 48 and 64 of the judgment, writing for the
majority:
‘[48] So, aside from mere labels, the seminal test is whether the primary or
dominant purpose of a statute is to raise revenue or to regulate conduct. If
regulation is the primary purpose of the revenue raised under the statute, it would
be considered a fee or a charge rather than a tax. The opposite is also true. If the
dominant purpose is to raise revenue then the charge would ordinarily be a tax.
There are no bright lines between the two. Of course, all regulatory charges raise
revenue. Similarly, “every tax is in some measure regulatory”. That explains the
need to consider carefully the dominant purpose of a stature imposing a fee or a
charge or a tax. In support of this basic distinguishing device, judicial authorities
23
have listed non-exhaustive factors that will tend to illustrate what the primary
purpose is.
. . .
[64] This point of departure is overbroad. It is not consistent with the money
Bills scheme of the Constitution nor with domestic and comparative judicial
authority on imposition of taxes. Not every duty, levy, charge or surcharge that
raises national revenue is a national tax. Not every law that permits the raising of
national revenue is a money Bill. That is plain from the Constitution. It sets
money Bills apart from other laws and imposes a distinct procedure for their
passage. This is because there are indeed many other laws that themselves
impose, or authorise the Executive to impose, a myriad of charges outside the
strictures of money Bill requirements. In each case, as our and other courts have
often held, the primal question is: what is the dominant purpose of the revenue-
raising law concerned? To raise revenue in order to fund the operations of the
State, or to regulate behaviour or defray costs or advance another legitimate
purpose? I have earlier sought to show that here the charge or levy was
expected to slow down the extent and the frequency of capital externalisation.
Revenue-raising was a mere by-product of the exit charge’s true purpose:
regulation of the export of capital. The exit charge was therefore not one which
attracts the definition of “money Bill.
In each case, as our and other courts have often held, the primal question is: what
is the dominant purpose of the revenue-raising law concerned? To raise revenue
in order to fund the operations of the State, or to regulate behaviour or defray
costs or advance another legitimate purpose?’
24
[44] On this approach, according to Mr Maleka, the Act’s dominant purpose is
regulatory and not a taxation or revenue measure. It is incidental but inevitable
that revenue has to be raised in the process to enable CRAN to execute its
statutory function of regulating and supervising the telecommunications industry.
[45] In answer to the alleged breach of the Dawood principle, Mr Maleka argued
that CRAN is a specialised body and for that reason the Dawood exception would
apply so as not to invalidate the impugned section. Mr Maleka submitted that the
exception is that discretionary powers may be broadly formulated in situations
where the decision maker is possessed of expertise relevant to the decisions to be
made.
Telecom’s principal submissions
[46] Telecom’s written argument focusses exclusively on s 23(2)(a) of the Act as
a form of taxation without representation. The core of Mr Heathcote’s argument on
behalf of Telecom’s, is the proposition that s 23(2)(a) adopted a levy regime
inconsistent with the express terms of s 23(1) which authorises such levy only in
so far as it seeks to ‘defray’ CRAN’s ‘expenses’. The argument goes that in its
present formulation, s 23(2)(a) ‘does not remotely relate to the costs of expenses.
It is simply a tax, where the levy charged is based on the gross income of the
service provider’. To be in sync with s 23(1), it is suggested on behalf of Telecom,
that the levy regime under s 23(2)(a) ought to require CRAN ‘to calculate or
estimate its expenses, and then, based on such calculations, to make regulations
to defray those calculated expenses’. In other words, there should be (as the High
Court also found) a ‘relationship between the charge (levy) and the scheme itself’
25
and that (according to counsel for Telecom), it ‘is this rationality requirement which
distinguishes a regulatory levy (or charge) from a tax.’
[47] It is submitted on Telecom’s behalf that:
‘A crucial feature of tax is that it is designed to raise revenue for general public
purposes. A fee or levy, on the other hand, is intended to raise funds to pay for a
specific service being provided. Another factor which generally distinguishes a
fee or a levy from a tax, is that, to be a fee or levy, a link must exist between the
quantum charged and the costs of the service provided in order for the levy to be
considered constitutionally valid.’ (Emphasis added.)
[48] The attack levelled against s 23(2)(a) is also extended to the impugned
regulation. In summary, it is argued that Item 6 fails to meet the ‘rationality test,
and without doubt, also the reasonableness test because it seeks to raise revenue
in a way that is not aimed at defraying an expense for a service rendered but is
instead based on the gross income of a licensee’. (My emphasis.)
[49] The nub of Telecom’s argument against the impugned regulation is best
captured in the following telling passage in the written submissions:
‘[F]or such a levy to have any rational or reasonable connection to the service
provided by CRAN, that levy must be determined with reference to the following:
. . . what are the costs of the service rendered?
. . . how many contributors are there? and
26
. . . with due reference to the provisions of Article 8 and 10 of the Constitution, it
must be determined what each service provider must contribute.
The papers demonstrate that such a calculation has never been made. Clearly,
CRAN plays taxman.’
MTC’s principal submissions
[50] I will only reference those of MTC’s submissions which are founded on the
evidence and contentions advanced by Telecom in its founding affidavit. I say so
because in its heads of argument MTC puts up some factual averments such as
that 50% of CRAN’s levy revenue comes from MTC. That is not permissible
because MTC participated in the appeal on the express basis that it would not
introduce evidence.
[51] According to Mr Gauntlett SC QC, counsel for MTC, s 23(2)(a) of the Act
offends the Dawood principle because it confers ‘uncircumscribed discretion’ on
CRAN in levying ‘revenue and taxation’ without representation. The argument
goes that the ‘content of the law is not ascertainable by reading it’ and gives
CRAN the discretion, amongst others, to itself on a discretionary basis decide
what ‘percentage to impose: it could be anything from zero to 100%’. Counsel
adds crucially that the provision contains ‘no requirement that the percentage be
within a prescribed range’. Nor is any method for computing the percentage
provided, or any requirement imposed that the percentage be approved by
Parliament, debated in Parliament, or even tabled in Parliament’.
27
[52] MTC also lays great store by the fact the section permits the imposition of a
levy on a percentage based on income in combination with any other form
identified in paras (b)-(d) of subsec (2) of s 23 of the Act. As Mr Gauntlett put it:
‘Thus a levy based on a percentage of income may be imposed in addition to a
levy based on a percentage of profit and to a fixed annual levy and a fixed
amount per call. And to these CRAN may add ‘’any other’’ form of levy
imaginable.’
By so doing, the argument goes, the legislature failed ‘to limit the risk of an
unconstitutional exercise of discretionary powers’.
[53] The net result of the statutory scheme of s 23(2)(a), MTC’s argument
concludes, is that CRAN has been impermissibly granted plenary legislative
powers under the section.
When is a regulatory charge not a tax? Comparative jurisprudence
South Africa
[54] In Shuttleworth the impugned subordinate legislation imposed ‘an exit
charge’ of 10% on capital being exported from South Africa. It was challenged on
the basis that it constituted a tax. Although, unlike in the case before us, the
money raised was in fact payable into the National Treasury, the Constitutional
Court held that the garnering of revenue by the Treasury was only incidental to the
dominant purpose which was to discourage capital flight from the country and to
protect the domestic economy. The court took the view that although ‘there was no
evidence of the actual or properly estimated costs of the regulatory scheme
28
related to the revenue raised, there was a close relationship between the
regulatory charge and the persons being regulated’.
Canada
[55] The leading cases in Canada on the tax versus regulatory charge
dichotomy are: Lawson v Interior Tree Fruit and Vegetable Committee of Direction
[1931] SCR 357; Westbank First Nation v British Columbia Hydro and Power
Authority, [1999] 3 SCR 134 (Westbank) and 620 Connaught Ltd v Canada
(Attorney-General, [2008] 1 SCR 131 (620 Connaught); Canadian Assn of
Broadcasters v Canada (FCA) [2009] 1 FCR.
[56] In Canada, just like in South Africa, when a dispute arises as to whether a
particular levy, fee or charge is an impermissible form of taxation without
representation, the approach is to ask the question: Is the levy in pith and
substance a tax or a regulatory charge? The pith and substance of a levy is its’
dominant or most important characteristics; to be distinguished from its ‘incidental
features’. Where a levy has characteristics of both tax and regulatory charge, the
court’s task is to ascertain which is dominant and which is incidental. In that
inquiry, it is the primary purpose of the law that is determinative.
[57] In Westbank, Gonthier J (at para 30) points out that when the question
arises whether a charge is a tax or a regulatory levy, the court looks at the
statutory scheme to ascertain whether its primary purpose is in pith and
substance:
29
‘(1) to tax, i.e. to raise revenue for general purposes; (2) to finance or constitute a
regulatory scheme, i.e., to be a regulatory charge or to be ancillary or adhesive to
a regulatory scheme; or (3) to charge for service directly rendered, i.e., to be a
user fee’
[58] To constitute a tax, a levy must, according to Gonthier J in Westbank at
para 43 be:
‘(1) compulsory and enforceable by law; (2) imposed under the authority of the
legislature; (3) levied by a public body; (4) intended for a public purpose12; and (5)
unconnected to any form of regulatory scheme. . . . .’ (My emphasis.)
[59] The significance of the fifth attribute is that if a levy is connected to a
regulatory scheme, it will not be a tax even if the other four attributes of a tax are
present.
[60] In the case before us, it is beyond doubt that s 23(2)(a) of the Act has the
first four attributes of a tax. The only real issue is if it is connected to a regulatory
scheme as envisaged by Gonthier J’s fifth attribute.
[61] To determine if a governmental levy is connected to a regulatory scheme,
according to Gonthier J in Westbank (para 44), that exercise engages a two-step
approach. As for the first step:
‘To find a regulatory scheme, a court should look for the presence of some or all
of the following indicia of a regulatory scheme: (1) a complete, complex and
detailed code of regulation; (2) a regulatory purpose which seeks to affect some
12 The position is the same in Namibia: Du Preez v Minister of Finance 2012 (2) NR 643 (SC) para 8.
30
behaviour; (3) the presence of actual or properly estimated costs of the
regulation; (4) a relationship between the person being regulated and the
regulation, where the person being regulated either benefits from, or causes the
need for, the regulation. The list is not exhaustive.’ (My underlining for
emphasis.)
[62] Gonthier J observed in the same paragraph that if the first step (i e the
existence of a regulatory scheme) is met, the second step is the following:
‘In order for a charge to be “connected” or “adhesive” to this regulatory scheme,
the court must establish a relationship between the charge and the scheme itself.
This will exist when the revenues are tied to the costs of a regulatory scheme, or
where the charges themselves have a regulatory purpose, such as the regulation
of certain behaviour.13’ (Emphasis added.)
[63] It becomes apparent, therefore, that there will exist a relationship between a
levy and a regulatory scheme, either if the income generated by the levy is ‘tied to’
the costs of the regulatory framework, or if the levy has a ‘regulatory purpose such
as the regulation of certain behaviour’.
[64] In applying Gonthier J’s two-step approach, Rothstein J in 620 Connaught
11 states as follows at para 28:
‘[I]f there is a regulatory scheme and it is found to be relevant to the person being
regulated under step one, and there is a relationship between the levy and the
scheme itself under step two, the pith and substance of the levy will be a
regulatory charge and not a tax. In other words, the dominant features of the levy’
will be its regulatory characteristics.’
13 The same approach was taken in Shuttleworth.
31
The High Court’s misdirection: tax vs levy dichotomy
[65] In the High Court’s understanding of the Canadian case-law, for there to be
a relationship between a levy and a regulatory scheme:
‘This [relationship] will exist when the revenues are tied to the costs of the
regulatory scheme. And the costs should be actual and properly estimated costs of
the regulation’14.
[66] The learned judge continued at para 13:
‘In the instant case, as s 23(2)(a) stands, the first respondent is being authorized
to impose a levy without carrying out actual or properly estimated costs of the
regulation. That being the case…I find that there can be no relation established
between the levy and the regulatory scheme itself in the way s 23(2)(a) is
formulated.’
[67] As I already demonstrated, under Canadian jurisprudence which the
learned judge a quo sought to apply, it is not necessary for there to exist a direct
relation between the quantum of the levy and the actual or estimated costs of the
regulation. It will suffice if the revenue derived from the levy is applied for the
pursuit of the policy and requirements of the Act.
[68] The High Court’s approach mirrors that of the first instance court in the
Canadian case of Broadcasting Assn v Canada [2009] 1 FCR. There the first
instance court took the view that the test whether or not a levy is connected to a
regulatory scheme, is whether there is a ‘reasonable nexus between the quantum
charged and the cost of the service provided by the regulatory scheme it is
14 Para 12, High Court judgment.
32
intended to support’. That court went on to state that: ‘If there is an insufficient
close relationship between the amount of the licence fee and the cost of
administering the corresponding regulatory scheme, then the charge constitutes a
form of taxation’.
[69] That is essentially the case of Telecom and MTC as accepted by the High
Court.
[70] On appeal the Federal Court of Appeal disavowed the approach of the first
instance court. As Reyer JA put it:
‘In my view, the Federal Court has concluded that a levy, other than a user charge,
will be a regulatory charge only if there is a reasonable nexus between the
quantum of the levy and the cost of the regulatory scheme in which it arises. With
respect, I am unable to agree with that interpretation.’
[71] The Federal Court of Appeal emphasised the importance of the distinction
between revenues being ‘tied to’ the costs of a regulatory scheme and where a
levy has a regulatory purpose. Reyer JA, speaking for the court, put it as follows at
para 49:
‘[In Westbank] Gonthier J held that when the revenues raised by a levy are ‘tied
to’ the costs of a regulatory scheme, the requisite nexus between the levy and
the regulatory scheme will exist. However, he also went on to say that the
requisite nexus will also exist when the levy has a regulatory purpose. It follows,
in my view, that where a regulatory purpose for a levy has been established, the
requisite nexus between that levy and the regulatory scheme in which it arises
will nonetheless exist even if the quantum of the revenues raised by that levy
33
exceeds the costs of the regulatory scheme in which that levy arises.’ (My
underlining for emphasis).
[72] And as Létourneau JA put it in a concurring judgment (at para 102):
‘However, when a regulatory scheme and a regulatory purpose exist and a
charge is levied for the benefit or a privilege as in this case, there is, in my
respectful view, no need for a reasonable nexus between, or a linkage to,
the quantum of the levy and the costs of the regulatory scheme…’
[73] The Federal Court of Appeal’s statement of the rule (which I prefer and
adopt) is important in the light of the manner Telecom and MTC frame their
argument against the scheme of s 23(2)(a) of the Act. It is abundantly clear from
the exposition of the relevant test that, a levy will be found to be a regulatory
charge, and not tax, either:
(a) if the revenues are ‘tied to’ the costs of the regulatory scheme or
(b) if it has a regulatory purpose.
In other words, when a levy is challenged as being a tax, the party seeking to
justify it will prevail if it establishes either (a) or (b).
[74] In oral argument Mr Heathcote suggested that it would never be
constitutionally permissible to express a levy to defray expenses as a percentage,
either on gross income or on profit. It bears mention that the scheme validated by
the Federal Court of Appeal in Broadcasting Assn v Canada was couched in terms
34
that are quite non-specific and also expressed in percentage terms. Section 11 of
the relevant Canadian Act empowers the regulatory agency to make regulations
for broadcasting fees providing for different classes of licensees, and interest to be
paid on overdue fees. It also empowers the agency to make regulations to provide
for fees ‘to be calculated by reference to ‘any criteria’ the agency ‘deems
appropriate’, including by reference to ‘the revenues of the licensees’. Section 11
of the Regulations made under the legislation then imposed regulatory fees
representing 1.365% of each licensee’s ‘gross revenue’ from broadcasting
activities in the year.
[75] It is apparent, therefore, that expressing a levy as a percentage and on
gross income is not irrational as suggested by Telecom. In my view, it is a
reasonable and rational justification put forward by CRAN in its answering affidavit
that expressing a regulatory levy as a percentage of turnover is preferred because
it limits the opportunity for licensees to manipulate chargeable revenue through
management decisions.
[76] The High Court therefore misdirected itself in invalidating s 23(2)(a) and the
impugned regulation without considering if it was connected to a regulatory
scheme in light of its finding that it was not connected to the cost of regulation.
Analysis: tax vs regulatory levy
[77] In the light of the High Court’s misdirection, I will proceed to consider if the
scheme of s 23(2)(a) of the Act amounts to taxation without representation. In para
[58] above I made reference to the four indicia (indicators) evidencing a regulatory
35
scheme. The question arises whether CRAN has established their presence in
order to escape the conclusion that the impugned levy is a tax. That is the first of
the two-step process for testing the existence of a regulatory scheme.
First indicator: complete, complex and detailed code of regulation
[78] I demonstrated at the beginning of this judgment the complex web of
regulation and supervision weaved by the Act, and its transformative and
developmental aspirations. The regulated industries are subjected under the Act to
comprehensive regulation in industries that are only open under a licensing
regime. CRAN bears the brunt for the realisation of all that. The first indicator is
therefore more than sufficiently met.
Second indicator: regulatory purpose intended to influence behaviour
[79] The policy underpinning the Act, the objectives to be pursued thereunder,
the manner in which the policy and the objectives is to be implemented, speak to
the legislature’s intent to influence behaviour in the regulated industries with
commensurate benefits to the licensees. The second indicator is therefore also
satisfied.
[80] Because of its centrality to the respondents’ argument on appeal, I will
return to the third indicator after I have dealt with the fourth indicator.
Fourth indicator: a relationship between the licensee and the regulation in the
sense that the licensee benefits from the regulation or causes the need for the
regulation.
36
[81] Telecom and MTC, as licensees under the Act, derive substantial benefit
from the regulatory scheme. Licensees operating in the regulated industries are
shielded from competition in what is a fiercely competitive landscape of
telecommunications. Licensees are protected from anti-competitive practices
(Chapter IV) and restraints of trade (s 51). They have other benefits:
interconnection15 (s 49), and sharing of infrastructure (s 50). In other words, the
privilege of holding a licence is a benefit accruing to the respondents from the
regulatory framework of the Act. The fourth indicator is therefore also satisfied. I
now proceed to the third indicator.
Third indicator: presence of actual or properly estimated costs of regulation
[82] Is the levy ‘connected to’, ‘tied to’, or ‘adhesive to’ the service rendered, or
is it ‘related to a regulatory scheme’? This indicator goes to the heart of the
second of the two-step process. In my view, the levy envisaged by s 23(2)(a) of
the Act is connected to a regulatory scheme. As we saw, that was a sufficient
criterion for validating a levy in Shuttleworth and in Canadian Broadcasting Assn. v
Canada.
[83] The approach contended for by Telecom and MTC is that to defray
expenses in the language of s 23(1) of the Act, a levy must be tied to the service
rendered by CRAN to them; CRAN should apportion to each licensee a
proportionate share of the cost of the regulation linked to it; CRAN cannot exact
15 Which is defied in the definitions section as ‘the linking of two telecommunications so that users of either network may communicate with users of, or utilise services provided by means of, the other network…’
37
through levies income greater than the cost of regulating the industry; and each
licensee must pay their due share of the cost of regulation.
[84] The way in which the respondents’ case has been formulated was
considered and resoundingly rejected by the Canadian Federal Court of Appeal in
Canadian Assn of Broadcasters v Canada. I can do no better than quote the apt
remarks of Reyer JA in:
‘[58] The third indicium-the presence of actual or properly estimated costs of the
regulation-requires a more precise focus on the scope of the putative regulatory
scheme. Otherwise, how could one quantify the actual or estimated costs of that
which is regulated? Thus, the question becomes whether the costs that are to be
considered under this indicium are the actual or estimated costs incurred in the
regulation and supervision of the entire Canadian broadcasting system or only
the costs that relate to the administrative activities of the Commission in fulfilling
its duties under the Act and of Industry Canada in managing the broadcasting
spectrum.
. . .
‘[61] Accordingly, I am of the view that the costs which are to be considered in
relation to this indicium must not be limited to only those costs that are incurred
by the Commission and Industry Canada in fulfilling their administrative
mandates in respect of the regulation of the Canada broadcasting system.
Rather, the costs that should be considered are all of the costs that are incurred
in fulfilling the policy objectives and other requirements of the Act and the
Regulations.’ (My underlining for emphasis.)
[85] Once it is established that the pith and substance (or the dominant purpose,
in the language of Shuttleworth) of a legislative measure is to raise revenue to
carry out the policy objectives of a legislation aimed at affecting behaviour through
regulation, it is not necessary to show that income is directly ‘tied to’, ‘connected
38
to’ or adhesive to’ the service provided by the regulator. It will be just as
acceptable if the levy is related to a regulatory scheme in the sense that the
monies realised are used to pursue the policy objectives and requirements of the
Act.
[86] Quite apart from the general regulation of the regulated industries, the Act
envisages the carrying on by CRAN of developmental and transformative functions
which are not funded from National Treasury. That the levy regime will in part be
used to finance those activities is axiomatic. I am therefore satisfied that the
dominant purpose of the Act is to regulate behaviour in the regulated industries,
and in the process to extend to licensees substantial privileges through licensing,
enforcement and prevention of anti-competitive practices. The fact that revenue (in
the broad sense of the word) is generated by the regulator is only incidental.
Section 23(2)(a) of the Act is therefore not a form of tax as the third indicator is
also satisfied.
[87] There is a regulatory scheme embedded in the Act which saves it from
being a constitutionally impermissible tax measure. The High Court ought to have
come to that conclusion on the primary issue raised, whether or not s 23(2)(a) of
the Act is a taxation measure.
[88] I am satisfied that the alleged unconstitutionality of s 23 (2)(a) of the Act
does not lie in the fact that it authorises a levy on ‘annual turnover’ or that it does
not require CRAN to base the levy on the cost of its service relative to a particular
industry or licensee being regulated. There is no merit in the assertion that
39
authorising a levy to defray CRAN’s expenses as a percentage of annual turnover
of a licensee is constitutionally impermissible. It now remains to consider if the
respondents have made out a case for the invalidation of the impugned section on
another basis.
Delegation of uncircumscribed discretionary power
[89] As I understand the respondents’ remaining case, the section in its present
form grants subordinate legislative authority to an administrative body, CRAN, to,
on a discretionary basis, determine levies in the absence of guidelines informing
the exercise of that power. (The so-called Dawood principle.)
[90] In defence, Mr Maleka argued that CRAN is a specialised body and that it
was recognised in Dawood that in such circumstances it is permissible for wide
discretionary power to be granted to an administrative body. Mr Maleka only made
a general observation about CRAN being a specialised body without suggesting
how that specialist skill is applied in the determination of the levy. It is not clear to
me what specialist endeavour is called for in determining the levy. Certainly it is
not demonstrable from the manner in which Item 6 was executed.
[91] On the converse, Mr Gauntlett evocatively described the rather draconian,
limitless and unchecked power enjoyed by CRAN when it comes to determining a
levy under s 23(2)(a). (As to which see paragraphs 51- 52 above). In my view,
what is striking about the provision is the absence of any guideline as to the limit of
the percentage on annual turnover that CRAN may impose. For example, there is
no upper threshold beyond which CRAN may not set a levy, nor the permissible
40
circumstances under which, if at all, that threshold can be exceeded. Can it really
be that, ‘Anything goes’?
[92] Can it be right for CRAN to have unchecked discretion, without any
ascertainable limitation (or even as much as oversight by either the Executive or
the Legislature), to determine what the percentage levy on ‘turnover’ should be?
What if in one year they decide it is 1.5 % and in another that it be 50%? How are
the licensees to know what percentage exceeds the legislative competence of
CRAN? Mr Maleka was not able during argument to provide a satisfactory answer
to this conundrum! Without a reasonable degree of certainty, regulations made
under s 23(2)(a) of the Act are fertile ground for incessant litigation. The rule
of law requires that the law is ascertainable in advance so as to be predictable
and allow affected persons to arrange their conduct and affairs accordingly.
Section 23(2)(a) fails that test.
[93] In its present form therefore, s 23(2)(a) of the Act constitutes the
outsourcing of plenary legislative power to CRAN given the absence of guidelines
and limits for its exercise. The legislature has failed to guard against the risk of an
unconstitutional exercise of a discretionary power by CRAN and the result is that s
23(2)(a) of the Act is unconstitutional and liable to be struck down, as must the
impugned regulation.
Consequences arising from order of invalidity
[94] Objective constitutionalism implies that a breach of the Constitution
invalidates the implicated provisions from the moment they were enacted (i o w ex
tunc), and unless a contrary order is made, s 23(2)(a) of the Act and Item 6 should
41
cease to have the force of law immediately. That is because of the default position
that when a provision is declared unconstitutional, the declaration of invalidity
operates retroactively. The inevitable consequence of which is that those who
suffered its existence on the statute book should not be made to bear its
consequences. Therefore, given the finding that s 23(2)(a) and Item 6 are invalid,
Telecom would not be required to make good to CRAN the monies imposed by the
impugned regulation as it must fall with the section on whose authority it was
made.
[95] Art 25 (1)(a) of the Namibian Constitution, however, empowers the court to
suspend the order of invalidity and to afford the legislature the opportunity to
correct the defect identified by the court. During the period of suspension the
implicated provision continues to have the full force of law.
[96] Mr Heathcote urged us on behalf of Telecom not to apply Art 25 (1) (a)
because the jurisdictional basis for its invocation is lacking in the present case as
that article is confined to the case in which there is violation of a fundamental
human right or freedom guaranteed under the Bill of Rights.
[97] I accept that Art 25(1)(a) is applicable to situations where the court finds a
breach of a fundamental right or freedom, or to pre-independence legislation.16 But
what does the court do when the legislature, as in this case, commits a breach of
the Constitution unrelated to the Bill of Rights? Because of the supremacy clause
the court has jurisdiction to adjudicate upon breaches unrelated to the Bill of
16 Mostert v Minister of Justice 2003 NR 11 (SC) at p. 42
42
Rights, yet for those cases the Constitution is silent on what remedy the court
must give.
[98] To complement the supremacy clause, Art 80(2) of the Constitution grants
the High Court all the powers of a superior court, including the power to hear
cases which ‘involve the interpretation, implementation and upholding of [the]
Constitution’. Once the court makes an order of unconstitutionality in respect of a
breach other than one related to the Bill of Rights it must, of necessity, deal with
the consequences of declaring it invalid. The principle of objective
constitutionalism informs that the default position is that an order of invalidity
operates ex tunc.
[99] I am unable to accept the proposition that for breaches unrelated to the Bill
of Rights the Namibian High Court enjoys no power to delay a declaration of
invalidity of legislation. Persuasive comparative jurisprudence will serve to
demonstrate the point. These are jurisdictions which, because of their
constitutional arrangements, recognise the constitution as the supreme law and
the courts enforce the principle of objective constitutionalism. Yet, while their
constitutions do not contain a specific provision empowering the courts to delay an
order of invalidity, their courts assumed such a power.
[100] The Botswana Court of Appeal17 has recognised a superior court’s
competence to tailor a remedy that best serves the interest of justice when
declaring a statute inconsistent with the constitution. The court also recognised
17 The President of the Republic of Botswana & others v National Amalgamated Local Central Government and Parastatal Workers & others CACGB-02-17 delivered on 29 May 2017, para 58.
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that the court has the power to make an order of constitutional invalidity
prospective.
[101] A similar jurisdiction has been recognised in Canada in relation to both
Charter18 and non-Charter breaches. As Hogg19 observes:
‘While s 52(1) requires a court to hold that an unconstitutional statute is invalid,
the courts have assumed the power to postpone the operation of the declaration
of invalidity. When a court exercises this power, the effect is to grant a period of
temporary validity to an unconstitutional statute, because the statute will remain
in force until the expiry of the period of postponement.’ (Emphasis added.)
[102] In those pages the author references several decisions wherein Canada’s
highest court applied the rule in the face of the principle of objective
constitutionalism: In Re Manitoba Language Rights [1985] 1 SCR 721; Sinclair v
Que. [1992] 1 SCR 579; R v Brydges [1990] 1 SCR 190; R v Bain [1992] 1 SCR
91; Schachter v Canada [1992] 2 SCR 679.
[103] The USA Supreme Court has assumed a similar jurisdiction in criminal
cases: Linkletter v Walker (1965) 381 US 618; Johnson v NJ (1996) 384 US 719
and Desist v US (1969) 394 US 244.
[104] I am satisfied that the High Court had jurisdiction to delay the order of
invalidity if it found (as it should have) s 23(2)(a) and item 6 unconstitutional on the
18 Equivalent to Namibia’s Bill of Rights, Chapter 3.19 Constitutional Law of Canada, Vol. 2 (Carswell, 1997) 37-4 to 37-8.
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basis that I have described. The question arises whether the order of invalidity
should be delayed.
[105] The levy of 1.5% on annual turnover is not per se an unconstitutional
exercise of discretionary power as it is well within the international norm as
demonstrated in CRAN’s answering papers and Canadian Broadcasting Assn v
Canada. In fact, as demonstrated by CRAN in the opposing affidavit, Telecom
considered that to be the case. That is a compelling reason for not making the
order of invalidity operate ex tunc. However, the rule of law dictates that care
should be exercised so that the effect of the order of invalidity is not rendered
meaningless and that those who have suffered its existence are not made to
endure it any longer than the circumstances justify.
[106] I would therefore validate s 23(2)(a) of the Act and Item 6 only up to the
point that its invalidity has been confirmed by this court: In other words, the order
of invalidity will operate ex nunc.
The resultant legal vacuum
[107] No doubt the order of invalidity taking immediate effect after this judgment
creates a legal vacuum in the levy regime. At the prompting of the Executive, the
Parliament has in the past acted with deliberate haste to deal with the court’s
declaration of invalidity of legislation and administrative decision-making. I have no
reason to believe that the same cannot be done in respect of s 23(2)(a) of the Act.
Was the challenge to the regulation time-barred?
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[108] CRAN’s allegation that the challenge to the regulation should have been
brought within six months of it being gazetted, as required by s 32 of the Act,
cannot be the basis for barring a challenge to the constitutionality of s 23(2)(a). As
I have demonstrated, in view of the amended notice of motion, the focus of the
attack is now s 23(2) (a) of the Act. Since s 23(2)(a) is invalid from the date of this
court’s order, Item 6 suffers the same fate and cannot validly be kept alive.
Retroactive operation of item 6
[109] Telecom pleaded in its founding affidavit that in the event that the court
finds the impugned regulation to be valid, it be declared that it should only apply
prospectively. Although that ground was not canvassed by Mr Heathcote in the
written heads of argument, the relief was not abandoned and must be considered
especially because the order of invalidity will operate ex nunc and Telecom will be
expected to honour its liability under the impugned regulation up to the point it is
no longer of any force and effect.
[110] There is a presumption against the retrospective operation of a legislative
measure, primary or subordinate. Generally, a statute will be construed as
operating prospectively unless the legislature has clearly expressed a contrary
intention.20 On this basis, the impugned regulation does not pass muster. Since it
is common cause that the levy was imposed against Telecom retroactively, the
regulation is ultra vires to that extent and must be made to apply only from when it
was duly gazetted.
20 Genrec MEI (Pty) Ltd v Industrial Council for the Iron, Steel, Engineering, Metallurgical Industry & others 1995 (1) SA 563 (A) at 572E-F).
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Costs
[111] Either party has had success and failure in equal measure. Although s
23(2)(a) of the Act and Item 6 have been declared unconstitutional, the order of
invalidity will not have retroactive effect and will have legal consequences only
from now and into the future. That does not detract from the fact that Telecom will
only be required to pay a part of the levy which operated retroactively, and it will
also not be liable for any levy after the order of invalidity. On the other hand,
Telecom, which has to date refused to pay the levy, will from the date the levy
was gazetted until the date of invalidity be liable to CRAN for the payment of the
levy imposed by Item 6. Not least significantly, CRAN has succeeded in obtaining
from this court an unequivocal statement of principle that a levy under s 23(2)(a) of
the Act is not a tax.
[112] Both Telecom’s constitutional challenge and CRAN’s opposition thereto
were not frivolous and certainly contributed significantly to the enrichment of
Namibia’s constitutional jurisprudence.21 Therefore, the present is an appropriate
case where each party must bear its own costs, both in the High Court and in the
appeal.
Order
[113] I propose the following order:
1. The appeal succeeds and the order of the High Court is set aside
and substituted for the following:
21 Compare Biowatch v Registrar Genetic Resources 2009 (6) SA 232 (CC) paras 23 and 24.
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‘(a) Section 23(2)(a) of the Communications Act 8 of 2009 is declared
unconstitutional and is hereby struck down;
(b) Subject to para (c) below, the order of invalidity in paragraph (a) will
take effect from the date of this judgement and shall have no
retrospective effect in respect of anything done pursuant thereto
prior to the said date.
(c) Telecom shall not be liable to pay any levy imposed covering a
period before the coming into force of Item 6 of the Regulations
Regarding Administrative and Licence Fees for Service Licences,
published as GN 311 in GG 5037 on 13 September 2012.
(d) There is no order in respect of costs.”
2. There shall be no order as to costs in the appeal and each party shall
bear its own costs.
________________________DAMASEB DCJ
________________________SMUTS JA
_________________________CHOMBA AJA
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APPEARANCES:
APPELLANT: I V Maleka SC (with G Coleman, R L Maasdorp)
Instructed by Angula Co Inc
FIRST RESPONDENT: R Heathcote (with him C E van der Westhuizen)
Instructed by Shikongo Law Chambers
INTERVENING PARTY: J J Gauntlett SC QC (with him F B Pelser)
Instructed by Tjombe-Elago Inc